TiVo + EchoStar
Bazinet suggested how the strategic and financial elements of such a marriage could work in a note issued yesterday. "In our view, TiVo belongs – for many reasons – at EchoStar, not Dish."
Bazinet said a merger between EchoStar and TiVo could help end their years-long patent war and prevent Dish from having to brick as many as 8 million DVRs and face the prospect of more hard costs and customer churn as a result. (See TiVo-Dish DVR Skirmish Nears End Game.)
Assuming EchoStar pays a 30 percent premium to TiVo equity holders, total consideration for TiVo would be about $2.3 billion, the analyst suggests, noting that EchoStar would need roughly $565 million in cash. That, he said, could come by way of Dish agreeing to pre-pay the merged "NewCo" about $1 a month per box for the TiVo rights.
Bazinet also argues that such a deal is more do-able considering that EchoStar was indemnified from TiVo-related reliabilities back in 2009, and EchoStar's financial obligation to any damages resulting from the TiVo spat is limited to $5 million.
Besides, EchoStar, not Dish, "is the natural wholesale provider of services to the pay TV space," he added.
Along with those predictions, Bazinet also downgraded EchoStar to Sell and lowered his price target from $24 per share, to $17.50. He also raised his target price on Dish $2, to $24, and maintained the firm's Buy rating on that stock.
— Jeff Baumgartner, Site Editor, Light Reading Cable